But most of the public and many clinicians are unaware of 'cord blood banking', which is carried out at only three hospitals in Britain.

Now the Department of Health has invested an extra £4.2million into the scheme, and leading doctors yesterday called on the Government to provide even more cash.

Professor Peter Braude, chairman of the Royal College of Obstetricians and Gynaecologists, said: "We would like to see public banking strongly supported in the public interest for the hundreds of thousands of children who could benefit in the future."

But they also issued a warning to parents thinking of paying to have their new-born baby's blood - a rich source of stem cells - stored privately.

More than 11,000 British parents have paid to freeze cord blood in case their child subsequently becomes ill, even when there is no known risk.

The RCOG warned there is "insufficient evidence" to suggest that it is of benefit to most families, echoing doctors' fears that private companies - charging up to £1,500 - are preying on parents' fears.

Professor Braude said: "We would like to see the need for private banks is no longer there.

"If we had a large enough NHS bank we wouldn't have private banks because we would get core blood when we needed it."

At present, the little-known NHS Cord Blood Bank collects voluntary donations of cord blood for possible future use in transplantation.

Families where there is a high risk of a genetic disorder can also store the blood with the NHS in case it is needed in the future.

Some experts argue that stem cells hold the clue to treating incurable illnesses such as multiple sclerosis, Alzheimer's and Parkinson's disease.

During a stem cell transplantation, a patient is given healthy stem cells which begin producing normal blood cells and replacing those which may have been destroyed.

Collecting 'cord blood' also bypasses the raging controversy surrounding embryonic stem cell research. That practice, where embryos are destroyed during the 'harvesting' of stem cells - has enraged pro-lifers.

She said: "We support the idea of more cord blood storage. Given that we throw away cord blood there are no ethical objections to its use and we believe stem cells from cord blood are the best way forward.

"The more samples we have in the NHS bank, the more chances there are for finding successful matches for transplantations to help those suffering from disorders."

Dr Ruth Warwick, president of the British Association for Tissue Banking, said: "The NHS Cord Blood Bank was funded with research and development money.

"There is NHS money coming in, but we would like to see more guarantees for the future so it wouldn't be hand-to-mouth finances."

A Department of Health spokesman said: "We still support the Royal College of Obstetricians and Gynaecologists' view that routine commercial collection and storage of blood and stem cells from umbilical cords after babies are born cannot currently be justified in low risk families.

"The Department has made additional investment, totalling £4.2million in 2005-6, for the NHS Blood and Transplant Authority to support the storage and use of bone marrow and peripheral blood stem cells, including public Cord Blood Banks, which we continue to support." But while calling for a larger bank, the RCOG also spoke of the difficulties of collecting the "cord blood."

New guidance issued by College warned of the "considerable logistical burden" placed on "already overstretched" staff, pointing out that collection of the cord blood has to be carried out during a particularly risky time for mother and baby.

Dr Susan Bewley, chairman of the College's ethics committee, said birth could be a dangerous time for mother and child.